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  1. #91
    action-reaction arco's Avatar
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    Default The Real Great Depression - 1873 similarities

    Interesting read................

    The depression of 1929 is the wrong model for the current economic crisis



    By SCOTT REYNOLDS NELSON


    As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else.

    Read on............................................

    http://chronicle.com/temp/reprint.ph...h07p4hy9z83x18
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  2. #92
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    Interesting read Arco. Unless I missed it, he forgot to mention there was no US Federal Reserve in 1873 and the US was on a classical gold standard with gold and silver coins in circulation.

    In 1873, the US economy was fundamentally different in so many ways.

    It's financial system was based on "sound money" gold and silver - not credit based government paper. At that time it ran a trade surplus, not deficit. There was no income tax. As there was no central bank, inflation was virtually non existent. The US was emerging as the strongest industrial and manufacturing economy in the world, Americans earned good wages and actually saved money, it was completely energy independent, it was not at war and the national debt was a miniscule fraction of GDP . . .

    Contrast this to an American Empire . . .

    that has fallen into a very deep recession, is militarily exhausted fighting two wars while potentially provoking a third in Iran, maintains over 700 military bases in 130 countries, is 70% dependent on foreign countries for it’s energy supplies, has exported most of it’s manufacturing plants and jobs overseas, has unheard of levels of personal, business and government debt along with some $100 Trillion in unfunded promises to the baby boomer generation for future entitlement programs stretching over the next 25 years and an annual trade deficit that is over 10% of GDP! Not to mention that it's banking system is insolvent . . .

    In my humble opinion, I think there are no direct comparisons. The world really is in unchartered waters and the more I learn, the more it seems to me that it is by design more than poor management. The confluences of government and Wall St. and the commonality of the players and legislation involved, the spectacular rise of "globalism" particularly over the past decade, are all too precise to be coincidental. What has occurred could simply not have happened without the knowing collaboration of both the US Government and the banks.

    Out of this chaos - will come order, but it may not be the order we desire . . .
    Last edited by Aussie; 09-02-2009 at 08:36 PM.

  3. #93
    action-reaction arco's Avatar
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    Aussie

    I think he was perhaps more comparing this to the current situation.

    "The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral"

    "As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis."

    etc.
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  4. #94
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    Was up late watching the box the other night and there was a program on about all the Chinese factory's closing down as demand for there goods had dropped off,and allot of the demand had come from the US.

    The US owes china allot of money which up until now they have let ride as the US was still consuming there stuff,sort of like a junky and a pusher,the junky may be a bit behind on what he owes the pusher but as long as he keeps buying and doesn't get to far behind the pusher keeps selling to him.

    But when the junky stops buying then the pusher wants all his money and if the junky doesn't have it he gets knee capped,so the US junky isn't buying and the Chinese pusher needs his money as times are hard for him so is the US about to get kneecapped ?.

    Cheers
    Miner

  5. #95
    Guru Dr_Who's Avatar
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    I agree with you Miner.

    Who will continue to support US debt in the near future. I am wondering how the US will be able to raise the trillions needed to stimulate the economy. All the money has gone into the pockets of greedy bankers who are friends of Bernake/Bush. There is no money left in the kitty.

    The US will struggle to raise more debt in the future.

    So where to from here?
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  6. #96
    Member Aussie's Avatar
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    Quote Originally Posted by Dr_Who View Post
    I agree with you Miner.

    Who will continue to support US debt in the near future. I am wondering how the US will be able to raise the trillions needed to stimulate the economy. All the money has gone into the pockets of greedy bankers who are friends of Bernake/Bush. There is no money left in the kitty.

    The US will struggle to raise more debt in the future.

    So where to from here?
    From Bill Buckler in the latest Privateer . . .

    "The US Treasury Department says it will need to borrow $US 493 Billion in the first three months of this year, a record amount for the January-March period. The Treasury says that figure comes on top of the $US 569 Billion the government borrowed in the last quarter of 2008, the all-time high for any quarter. The US is now expected to borrow a record $US 2.5 TRILLION over the fiscal year ending on September 30, nearly THREE TIMES the $US 892 Billion it borrowed over the prior twelve months.

    Using data from the Bank for International Settlements (BIS), the OECD and others, it is known that the $US 2.5 TRILLION in NET free savings does NOT exist in the entire world. The world cannot “fund” these monstrous US deficits. Worse, when the US budget deficit of $US 2.5 TRILLION is compared to the US nominal GDP of $US 14.3 TRILLION, the budget deficit is 17.5 percent! Something has to give."



    In short, the answer will be Fed monetization (Printing), they have no other choice. Bernanke has already said in his last official statement that the Fed will (has?) started buying the long end of the Treasury market - the 30 year bond. This is an attempt to keep a lid on US mortgage rates but it is likely to backfire as the statement above says "Something has to give" and it will be the USD. Foreigners will demand higher rates or they will dump US Bond's en masse and head for . . . you guessed it - precious metals and commodities as a store of value.

  7. #97
    Member Aussie's Avatar
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    Quote Originally Posted by arco View Post
    Aussie

    I think he was perhaps more comparing this to the current situation . . .
    Yeah thanks arco, I got that. I was just trying to indicate that as bad as the panic of 1873 may have been, the US was in a far better position to weather it back then, than it is now.

    Cheers

  8. #98
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    Quote Originally Posted by Dr_Who View Post
    I agree with you Miner.

    Who will continue to support US debt in the near future. I am wondering how the US will be able to raise the trillions needed to stimulate the economy. All the money has gone into the pockets of greedy bankers who are friends of Bernake/Bush. There is no money left in the kitty.

    The US will struggle to raise more debt in the future.

    So where to from here?
    Interesting that you say this while at the same time also say now is a good time to buy property.

    Cheers
    Miner

  9. #99
    Guru Dr_Who's Avatar
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    Quote Originally Posted by miner View Post
    Interesting that you say this while at the same time also say now is a good time to buy property.

    Cheers
    Miner
    Property for me is a long term play. I am cashed up and with rates at these levels, it makes more sense for me to put my money in properties than in the bank. I have holding power and can ride out the storm. Property is part of my strategy in the portfolio, esp when I sold out all my investment property 2-3 years back.

    Hey, I maybe wrong, but then I have holding power and can ride it out, esp when my investment properties are all cashflow positive.
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  10. #100
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    Smile

    No problem mate good luck with your cunning plan.

    Cheers
    Miner

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